Intel's Results Fail to Convince Investors of Turnaround

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2:03Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lovellow in San Francisco. This is Bloomberg Tech. Coming up, Intel shares tumble after the CEO sparks concerns that he's more focused on cost-cutting than innovation. Plus, Tesla set to roll out its robo-taxi service in San Francisco this weekend, according to reports. But how robo is it with a person in the driver's seat? And the FCC approves Paramount's merger with Skydance after a few concessions to appease the Trump administration. But first, Ed, we check in on these markets. after a week that has been a relatively turbulent one in the face of the micro that is the earnings story and the macro that is Japan trade deal and what we see in terms of the Federal Reserve, whether it cuts or whether it doesn't, and that relationship between Fed Chair Powell and Trump as he visits, of course, the new building site of the Federal Reserve.

3:00We're actually up 0.8 % over the last five trading days because Big Tech has managed to win out in the face of the AI action plan some semiconductor outperformance. Move on to some of the individual names, though, because some earnings on the semiconductor front have not been pleasant. But I also want to look what's happening in the world of crypto for you before you get to the micro, Ed. I'm down 3 % on Bitcoin. That's more about the Fed story. That's more about the fact that maybe the Federal Reserve won't be cutting in the near term with pressure off of Fed Chair Powell's role, it seems as Trump and him meet over the course of the last day or so.

3:31We're down 3%. What have you got? Yeah, Intel. Intel's probably our top tech story, and it's probably our top earnings story. The stock's down more than 9 % on track for its biggest drop since the first week of April. The print was fine, and we'll get into that in just a moment. But all it took was just a few words from Lit Boutan on the earnings call. Basically, a focus on cost-cutting, not on the product, not on innovation. The result is after hours, pre-market, and now in the session tumble. Caroline, bring us the details. Yeah, let's get all the results from Ian King. I have to say, this almost felt like an omission of defeat.

4:03the fact that they're pulling back on their manufacturing, but they're also pulling back on almost innovating in. Yeah, I mean, this is the way that analysts have interpreted what he said, which is that this future production technology, this, you know, this key to them being more competitive. Maybe we won't do it. Maybe we won't do it if we don't get commitments from outside customers. And that is not being taken well at all by analysts who have been listening to the company telling them, hey, this technology, this 14A, this is the key to our future. This gets us back in the game. And now maybe we're not going to do it.

4:38So there's a lot of like, what's going on here sort of reaction to them. Ian, the headline that's driving the stock lower is that the CEO is struggling to convince Wall Street that the turnaround is intact. You had some time on the phone with the CFO, Dave Zinsner. And part of what you guys discussed was where they will pull back, probably in Europe, and where they'll continue to invest. What can you tell us? Yeah, I mean, they, under Pat Gelsinger, had all of, you know, laid out a map of basically covering the world of all of these new projects that they were going to do that, you know, that they were going to make themselves as manufacturing powerhouse again.

5:16Germany, Poland, packaging facilities here, there, and all of those are going, right? And even the Keystone project of Ohio, which we already know has been delayed, is going to be delayed even further. So we're seeing a kind of retreat on that building. And what they said was, look, we're not going to build ahead of demand. We're going to wait until we get demand. And, you know, the analysts were like, good, well done, that's sensible. But then when we talk about future technology, then that's when things get tricky and that's when people get concerned. Concerned that they're not going to build 14A until they get the commitments in.

5:48But what I'm really interested in is how this fits in the context of security, of supply chain here in the United States. How can the federal government that wants an AI action plan and manufacturing here in the U.S. just let Intel delay Ohio back to at least 2030? Yeah, I mean, probably more important than Ohio would be 14A, because if they don't go to 14A, this new production technology, then they're effectively saying, that's it, we're done, we're frozen in time. So U.S. indigenous semiconductor leading edge capability grinds to a halt and doesn't advance. So clearly that would be a massive concern to the government were that scenario to unfold.

6:28And that's something which is obviously people are going to focus on very heavily. Bloomberg's Ian King, who leads our semiconductor coverage. Thank you very much. It's actually been a really busy week of tech earnings across the world of tech, software, hardware, chips, and some of the hyperscalers as well. Let's get out to Brent Till, Jeffrey's analyst. And it's been a week that's really interesting. I just got back from Washington, D.C., right, Brent, for the AI action plan. I listened to the president. I appreciate that Intel is not actually on your coverage list, but it was interesting that Intel wasn't in the room there in D.C.

6:59Alphabet wasn't either. They had their earnings print. Would you say there's kind of one core lesson right now about what's happening in infrastructure in America and what the biggest result of this week has been from the administration? Yeah, I think the key takeaway is that the AI investment boom is still happening at a rapid rate. There's no slowdown. Google raised their entire CapEx from$75 to$85 billion on their cloud business, not their ad business. So that's selling Google Cloud to enterprises. And I think it tells you that we're still in the infrastructure build-out. we continue to see the dirt, the energy the power lines the core servers that's really been the focus and the AI trade has not come to applications it has not gone to Salesforce or Adobe to many of those names they're not monetizing this yet we think that happens and that has to happen for AI to work in our view that we have to go up through the infrastructure layer the application layer And so I think that's the next chapter.

8:07But I'd say so far, alive and kicking and doing very well in AI infrastructure. There's been no signs of slowdown. You heard Mark Zuckerberg talk about spending hundreds of billions of dollars in CapEx just a couple of weeks ago. Google just raised their CapEx by 10 bill. And then we've got Microsoft, Amazon on deck. And we think that ultimately in our checks, the demand for hyperscaler infrastructure is accelerating. and we're seeing the tariff worries starting to shake off. Brent, the AI action plan largely focuses on deregulation and expedited permitting. Of all of the companies that you cover where that's relevant, how will it help them?

8:52Well, I think it should help the entire industry. If we have lower bars and lower regulation, we're going to see hopefully a lot more consolidation. I think the one thing we're seeing is there's a lot of companies that say they're AI first. We saw this movie in the Internet boom in the 90s. We saw this in the cloud boom. There's going to be massive consolidation. So you're seeing already the beginning of an M &A wave. So I think it'll help M &A. It should help the build out. It should help protect the U.S. in terms of what we're doing as a country in AI. So I think the president has this right.

9:25And certainly you look at our allies in building this. It's a collection of different technology companies. And I think what we thought would happen at the beginning of AI is that we consolidate power to a few. And what we're finding is it's consolidating power to many. And so there's just not enough capacity. Everyone's capacity constrained. Google said they're capacity constrained. Microsoft said they were going to be constrained. But what's happening now is that you're seeing demand get spread all over. And that's actually good for the ecosystem and good for many vendors. Over time, again, I think you're going to see a tremendous amount of cleanup in M &A, and that needs to happen because there's probably going to be too many companies chasing this long term.

10:06But short term, I think, you know, there's no question we're in AI boom, and it's really exciting. And I think it's real. I don't think this is fake like we've seen in other tech trends. It's interesting. ServiceNow, Bill McDermott yesterday, saying this is an existential issue for many in CRM who aren't on the AI bandwagon. And thinking about to IBM. and they look like they're selling well in terms of consulting into AI. The software bit was a little bit woolly and people pulled back from what had been a ramp up in the stock. Brent, just before we push forward to what's next week, what did you make of some of the weaker plays and how much they get beaten up this week?

10:42I mean, IBM didn't have a phenomenal quarter. They introduced a new infrastructure cycle and that kind of pause demand. They also reintegrated Hashi, which is a deal they did. And so the software business decelerated the point, you know, it wasn't it wasn't terrible, but the stock can run up and is almost sitting at the same multiple that Microsoft was at. And I think, you know, IBM is a single digit grower. Microsoft is a double digit grower. So I think the stock got mismarked. We don't have a buy on IBM. We like what they're doing. We like Arvin's software centric strategy. So we're fundamental fans.

11:17The stock just had a big move and it kind of didn't make sense maybe where it was at based on the results. Yeah. So I don't I want to look at IBM's results and say, you know, that they're a proxy. Actually, the CEO upgraded the overall economy from cautiously optimistic to optimistic. And I said, well, what's next? Is there a ludicrous speed or another speed above optimistic? But, you know, Arvin, you know, has a pretty good lens in what he sees. And I think that was probably the most interesting thing, which is to us. That's a good telltale. What's about to happen next week? Yeah, I mean, Arvin told me he's really looking at M &A at the moment and also that he's more optimistic about consulting for 2026 than he is about 2025.

11:58Push forward then for next week and the optimism around what this means for Microsoft's spend, what this means for Amazon's spend and how much their cloud units are growing.

12:08Yeah, so Microsoft, they're on acceleration path. They've said they're capacity constrained, they're accelerating the guide to an acceleration. We're now looking at mid 30 % Azure. infrastructure build. For Amazon, last quarter, they put up 20 % backlog, and that was up from 14%. So their backlog is growing, which is a sign of what's going to happen with revenue. So we continue to see, right now, continued acceleration across the board. And again, I would highlight, we haven't even seen AI hit these numbers in a big way. I mean, for all these big companies, it's less than 5 % of its whole revenue.

12:43Sorry to interrupt. We just had 30 seconds left, but I wanted to ask that. Is CapEx still the data point to watch or you want to see top line growth as a result of CapEx in the prior year? Bookings is number one, revenue growth and then CapEx in that order. Brent Hill, Jeffrey, it's great to have you back on Bloomberg Tech. We really appreciate your time. Thank you very much. Now, coming up, Tesla's reportedly set to expand its robo taxi rollout this weekend to the city of San Francisco. We'll find more on that next. This is Bloomberg Tech.

13:33Time now for Talking Tech and first up, Lyft. It has plans to deploy autonomous shuttles in the United States in late 2026 as it tries to catch up to Uber's driverless rides. Now, Lyft will partner with Austria-based manufacturer, and Spentler Group to test its Holon electric shuttles in cities and airports. Plus, Alphabet CEO Sundar Pichai is now worth over$1 billion, according to Bloomberg Billionaires Index. Now, the CEO holds just 0.02 % economic stake in the company, but Alphabet has added more than$8 trillion in market value since 2023. And SpaceX's Starlink satellite internet service network, well, it's been restored after an hours-long outage.

14:12The Elon Musk-led unit said in a post on X that the issues had been resolved, but didn't say how widespread the issue was or how many subscribers were affected. Ed. OK, let's get to elsewhere in Elon, Inc. Tesla is reportedly set to plan a rollout or expansion of its robo-taxi service to San Francisco beginning this weekend. That's according to a report from Business Insider. I want to bring in Bloomberg's Max Chafkin, one of the Elon, Inc. team. And I find this interesting. The specifics are that it's planned for maybe today, Friday. On the earnings call earlier in the week, which you participated in, Ashok Elaswamy, who's the robotaxi chief, said that they were doing this anyway.

14:51But there are some bits that we don't know. What was in the Business Insider report and what do you make of it? So the Business Insider report is based on a memo, an internal memo, you know, within Tesla promising a sort of robo taxi service, albeit one with a driver in the driver's seat. So so I don't I'm not sure if you can really call it a robo taxi if there is a if the driverless car that does have a driver. But but, you know, what they're saying is that they're testing this. The other thing I'll say is California has a pretty robust permitting system for driverless cars. In fact, this has been around since 2018.

15:31I believe the first company that had this permit was Zooks. But Waymo, Cruz, lots and lots of companies for years have been operating these services with permits, as anyone who lives in the Bay Area knows. Tesla does not have any of these permits yet. What they have is something called a TCP permit. This is basically a permit to operate a charter service with human drivers. So effectively like a black car service, a chauffeur service, whatever. And so my guess is that is how they're going to justify this, which is to say, you know, it's not really an autonomous car as far as the law is concerned.

16:09Of course, Tesla has blurred the lines between what constitutes an autonomous car for years and years. We were just seeing the Tesla VP of AI Software, what he said about the rollout of RoboTaxi more broadly on the earnings call. And I'm really interested ultimately here, Max, as to how you get to this vision that by, I think it's the second half of the year, half of Americans are meant to be able to access a RoboTaxi. But at the moment, there are but a handful in Austin and maybe a few with a driver, at least a person at the driver's seat starting to do San Francisco. I mean, look, Tesla doesn't really have a RoboTaxi service today.

16:45Like what it has is, you know, 11 or so cars in Austin that have a safety observer. And of course, we know that there, as I said before, there are other companies that are operating actual robo taxi service. Waymo has something like 1 ,500 vehicles in five cities without drivers. I think it just all depends on how you define it. My guess is what they're going to say is they have these testing vehicles. They have relatively wide ranges. Maybe you do some math and theoretically you can justify saying that half the population is covered. But I think by any normal person's definition, that just isn't going to be true just because technically we are not that close to that being possible.

17:29The other big story out today is about Optimus. In March, this is how Elon Musk outlined the plan for Optimus in 2025. Listen to this, Max. This year we hopefully will be able to make about 5 ,000 Optimus robots. Technically, we're aiming for enough parts to make 10 ,000, maybe 12 ,000. But since it's a totally new product with totally new, like everything is totally new, I'll say we're succeeding if we get to half of the 10 ,000. But even 5 ,000 robots, that's the size of a Roman legion, FYI, which is like a little scary thought, like a whole legion of robots. I'd be like, whoa. But I think we'll literally build a legion, at least one legion of robots this year.

18:21There's a report from the information out today that disputes what Elon Musk outlined, that they are actually nowhere near to 5 ,000. What do we know, Max? Yeah, this information report, it's pretty – it pours some cold water on the statements that Musk has made. It talks about real difficulty manufacturing parts of these robots, particularly the hands. I mean, one thing in that clip that's worth noting, Elon Musk is right when he says this is new and this is hard. And so, you know, in a weird way, you know, whereas with robo taxis, there are lots of other companies that have been doing what Tesla is doing for quite some time.

19:00With Optimus, if they were actually able to make this work or really get close to making it work, that would be amazing. That would be really impressive. But from this information story, you know, it seems like they're just not progressing where they are. Musk talked about, what was it, Allegiant? And I think where what the information said is they have something like 50 optimists, optimi, you know, kind of walking around and picking stuff up and putting it down in the factory. Not not doesn't sound like doing actual work yet. I don't know how many 50 is, but definitely less than a legion. My, you know, Musk is somebody who is totally focused and his his sort of expertise is getting investors to look at the future, not to look at the near here and now, but to look ahead.

19:41And so I think if you look at the timing of this robo taxi launch, one possible reason would be you have this information report coming out that that makes this other futuristic thing look like it's much further out. So, hey, let's let's let's speed up the robo taxis. Let's get investors excited about something. I don't know what 50 is to soccer squads. Thanks so much. Brigade. A brigade. Meanwhile, coming up, less about OptiMai and more about the U.S. and China. Both pushing ahead to lead the global AI rights, we're going to speak with Teresa Carlson of the General Catalyst Institute on a conversation on how governments can support cutting-edge tech.

20:21This is Bloomberg Tech.

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22:32Help support healthy hair, skin, nails, bones, and joints so you can stay vital, stay you. Visit vitalproteins.com to learn more and where to buy. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. Chinese tech leaders, government officials, investors, well, they're headed to Shanghai this weekend for the World AI Conference. It comes as Beijing looks to propel its AI ambitions forward in the face of the new AI action plan from Washington, meant to cement U.S. dominance in the space. For more, we're joined by Teresa Carlson, founding president of the General Catalyst Institute.

23:07And you've been applauding this AI action plan. Is there enough there for startups as well as big tech? It's definitely got an amazing basis for it. It was broad and it was reaching. And I've never seen an administration act this quickly. And I think one of the biggest issues here is that we need to be ahead of China in all aspects. And the only way that this is going to occur, if we have a public-private partnership where you have both government ensuring that they're cutting all the regulatory tape and you have private sector both developing and providing capital into these markets. Teresa, I've been trying to write down everything that I learned from being in the room and speaking to all those officials and CEOs.

23:53And the thing I keep writing down is no software people. On stage, there were none of the frontier or model making names. Everything was about energy, chips and deregulation. Do you have a view on that? Yes. It really stood out. I was in that room with you and it was the one thing we were all talking about. But I actually thought it was very energizing because we backed over 800 startups at General Catalyst in all different areas. from energy to finance to defense to healthcare. And a lot of these companies now are way outside of, they're not just doing software. A lot of them are doing rebuilding, wire harnessing, new capabilities that we're seeing that are really required.

24:37So for me, it was actually very energizing from a software. I've been doing software for 25 years. So seeing more hardware capabilities. And look, what do you need for true AI? You need energy, right? You need chips. You need land. You need all these capabilities. We've got to rebuild American manufacturing in order to have AI dominance. So I believe that they did focus on the right things from that event on Wednesday. I mean, your expertise and experience is so important here because you've led large businesses. I think of Splunk. I also think of the startups like Flexport. But you've been in-house in Microsoft and AWS.

25:15And I'm really interested as to whether or not some of the startups that you help now back and invest in are going to be able to get a direct line into federal government. Are they going to be able to sell more easily in this environment? We actually just took, we've had two what we call fly-ins at the General Kellogg's Institute. March, we took six of our top health care AI companies in to both meet government agencies, the White House and Congress. Two weeks ago, we took seven defense and industrial startups in to meet DOD, the White House, and congressional leaders. And it was fantastic. They were amazing.